Subprime woes dent Wall Street profits
Subprime woes dent Wall Street profits
By Ben White in New York
Copyright The Financial Times Limited 2007
Published: June 14 2007 16:33 | Last updated: June 14 2007 16:33
Turmoil in the subprime mortgage market took a toll on second-quarter earnings at Goldman Sachs and Bear Stearns amid suggestions that Wall Street’s long run of record profits may have peaked.
Goldman, which has set the pace on Wall Street with a run of blockbuster earnings, said second quarter profit increased just 1 per cent to $2.33bn, or $4.93 a share, from $2.31bn, or $4.78, last year.
Net revenue in the bank’s dominant fixed income, currency and commodities business dropped 24 per cent to $3.37bn.
Goldman’s results were down sharply from a record first quarter in which the bank earned $3.2bn or $6.67 per share.
Bear Stearns, which has the most exposure to the mortgage market among Wall Street banks, reported a 10 per cent decline in second-quarter earnings to $486m, or $3.40 per share, excluding a one-time charge.
Fixed income revenue dropped 21 per cent to $962m reflecting a decline in residential mortgage origination and securitisation volumes.
Wall Street banks have been booking huge profits in recent quarters, reaping the benefits of near-perfect market conditions and record-breaking corporate deal-making.
The money is still flowing in, as evidenced by the record results posted by Lehman Brothers on Tuesday. However, problems in the mortgage market and the recent increase in global interest rates have led some to suggest Wall Street may already have seen its best performance for the current cycle.
David Viniar, Goldman Sachs’ chief financial officer, noted in an interview that the bank’s results were still strong by historic standards.
“We are suffering a little bit by comparison here,” he said. “This is still the fourth best quarter [the fixed income, currency and commodities division] ever had.”
While revenue in Goldman’s FICC division was down, $700m of the decline was attributable to the sale last year of a New Jersey power plant.
Goldman said investment banking net revenues were up 13 per cent to $1.7bn. Trading and principal investments net revenues were down 6 per cent to $6.65bn, reflecting losses on the bank’s investments in Japanese bank Sumitomo and the Industrial and Commercial Bank of China.
Asset management revenue increased from $954m to $1.1bn though incentive fees dropped sharply, reflecting poor performance at Goldman’s flagship Global Alpha hedge fund.
Goldman Sachs shares were down nearly 3 per cent to $227.40 in early trade. Bear Stearns shares were down 1 per cent to $148.25.
By Ben White in New York
Copyright The Financial Times Limited 2007
Published: June 14 2007 16:33 | Last updated: June 14 2007 16:33
Turmoil in the subprime mortgage market took a toll on second-quarter earnings at Goldman Sachs and Bear Stearns amid suggestions that Wall Street’s long run of record profits may have peaked.
Goldman, which has set the pace on Wall Street with a run of blockbuster earnings, said second quarter profit increased just 1 per cent to $2.33bn, or $4.93 a share, from $2.31bn, or $4.78, last year.
Net revenue in the bank’s dominant fixed income, currency and commodities business dropped 24 per cent to $3.37bn.
Goldman’s results were down sharply from a record first quarter in which the bank earned $3.2bn or $6.67 per share.
Bear Stearns, which has the most exposure to the mortgage market among Wall Street banks, reported a 10 per cent decline in second-quarter earnings to $486m, or $3.40 per share, excluding a one-time charge.
Fixed income revenue dropped 21 per cent to $962m reflecting a decline in residential mortgage origination and securitisation volumes.
Wall Street banks have been booking huge profits in recent quarters, reaping the benefits of near-perfect market conditions and record-breaking corporate deal-making.
The money is still flowing in, as evidenced by the record results posted by Lehman Brothers on Tuesday. However, problems in the mortgage market and the recent increase in global interest rates have led some to suggest Wall Street may already have seen its best performance for the current cycle.
David Viniar, Goldman Sachs’ chief financial officer, noted in an interview that the bank’s results were still strong by historic standards.
“We are suffering a little bit by comparison here,” he said. “This is still the fourth best quarter [the fixed income, currency and commodities division] ever had.”
While revenue in Goldman’s FICC division was down, $700m of the decline was attributable to the sale last year of a New Jersey power plant.
Goldman said investment banking net revenues were up 13 per cent to $1.7bn. Trading and principal investments net revenues were down 6 per cent to $6.65bn, reflecting losses on the bank’s investments in Japanese bank Sumitomo and the Industrial and Commercial Bank of China.
Asset management revenue increased from $954m to $1.1bn though incentive fees dropped sharply, reflecting poor performance at Goldman’s flagship Global Alpha hedge fund.
Goldman Sachs shares were down nearly 3 per cent to $227.40 in early trade. Bear Stearns shares were down 1 per cent to $148.25.
posted by Carlos T Mock at 10:27 AM
0 Comments:
Post a Comment
<< Home